Q1 2018 Hedge Fund Holdings: Top Stocks, New Buys & More

May 24, 2018 | John S Kiernan, Senior Writer & Editor

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The 50 largest U.S.-based hedge funds on the Barron's Penta Top 100 Hedge Funds boast more than $6 trillion in assets. For comparison, that’s more than the GDP of the 36 smallest U.S. states combined. Furthermore, the median yearly earning for a hedge fund manager is now just under $350,000, but there are many who are billionaires.

So it makes sense that people pay attention to what they’re buying, selling and holding. We want to replicate their success. Hedge funds’ quarterly public disclosures, mandated by the Securities and Exchange Commission, give us a window into their recent activity.

To help investors make informed decisions about where to put their money, WalletHub analyzed the filings of over 400 top hedge funds, identifying their biggest holdings, new positions, recent exits and more. You can check it all out below, including a breakdown of the names that billionaire stock pickers – from Warren Buffett to George Soros – prefer these days.

Top Billionaire Stock Picks

Hedge funds have become so popular that the billionaires behind them have celebrity status. Not only are they rich and famous, but they can move markets with just a few words. Investors worldwide follow their every move.

If you, too, are curious to see how billionaire investors such as Warren Buffett, Carl Icahn and Bill Ackman are making their money these days, just check out the following infographic. You’ll find the top three holdings of 12 big-name billionaires, plus an overview of the stocks they’ve been buying and selling lately.

Hedge Fund Holdings by Sector

Diversification is key to investing success. That’s because spreading your chips around reduces risk and allows you to benefit from the broader market’s long-term upward trend. That’s why even the world’s best investors hedge their bets by allocating capital to various segments of the economy.

The investments don’t simply match the economy’s makeup, however. And they’re not always the same year to year, either. That’s why we can learn a lot from the way in which hedge funds diversify their investments. With that in mind, here’s a breakdown of where the money was during Q1 2018.

Ask the Experts: What Can We Learn From Hedge Funds?

In search of advice on how much stock we should put into billionaires’ stock picks, WalletHub asked the following questions to a panel of investing experts. You can check out their bios and responses below.

How will the recent tax reform, specifically corporate tax reform, impact stock prices in the short and long run?

To what extent does President Trump’s administration deserve credit for recent stock market performance?

Is the current stock market prone for a correction, or is there still room for growth?

What tips do you have for an individual investor? What sectors are expected to grow the most in the coming years?

Dirk Krueger

How will the recent tax reform, specifically corporate tax reform, impact stock prices in the short and long run?

I think it is likely that the tax reform redistributes income from owners of labor to owners of capital, which would raise stock valuations.

Terrance Odean

Rudd Family Foundation Professor of Finance, Haas School of Business, University of California, Berkeley

How will the recent tax reform, specifically corporate tax reform, impact stock prices in the short and long run?

The long run effect of the corporate tax cut on the economy is uncertain. In the short run, it is a windfall for stock owners. The government, bond holders, and stock owners share a company's earnings with priority of claims in that order. Stock owners are the residual claimants. If the government takes less of the companies' earnings the shareholders get more. That makes the company's stock worth more and the price goes up.

To what extent does President Trump's administration deserve credit for recent stock market performance?

The corporate tax cut from 35% to 21%, which President Trump supported and signed, undoubtedly contributed to the increase in stock prices but at a cost to the government of a significant decrease in tax revenue.

Is the current stock market prone for a correction or is there still room for growth?

Prices are high by many historical measures; however, my crystal ball is cloudy today.

What tips do you have for an individual investor? What sectors are expected to grow the most in thecoming years?

My tips for US individual investors are to by low cost well-diversified mutual funds such as index funds. While market-timing is possible, research my co-authors and I have done suggests that individual investors usually get it wrong. So most investors would be better off taking a long-term, buy and hold approach to investing and not focusing on market-timing.

Hany A. Shawky

Professor/ Director, Department: Center for Institutional Investment Management, University at Albany, State University of New York - School of Business

How will the recent tax reform, specifically corporate tax reform, impact stock prices in the short and long run?

I think that lowering the corporate tax is way over due and what they did was a great step in the right direction. We have lived for too many years being the highest corporate tax nation in the civilized world. To clarify, lowering the corporate tax rate not only makes our corporations and our products more competitive, but also enhances cash flow and profitability of firms thus positively impacting their stock prices.

To what extent does President Trump's administration deserve credit for recent stock market performance?

He should get credit to the extent of what has been achieved in terms of:

Lowering the tax rate, which has positively impacted equity values

Lowering unemployment by focusing on "made in America"

Achieving more equitable trade agreements with trading countries

Is the current stock market prone for a correction or is there still room for growth?

While a correction could happen any time, the current stock market appears to still have some more room to grow.

What tips do you have for an individual investor? What sectors are expected to grow the most in the coming years?

High Technology Stocks (Apple, Amazon, Google, IBM, Microsoft, Intel, etc.) and health care (major pharma, Biotech, Health Insurance) stocks are expected to grow the most in the coming years.

Richard Hauser

Assistant Professor at Gannon University

How will the recent tax reform, specifically corporate tax reform, impact stock prices in the short and long run?

Corporate tax reform would be expected to significantly and positively impact stock prices, especially in the long run. The reduction in corporate taxes increases corporate free cash flow which in turn increases intrinsic corporate valuations. While there has been much debate about what corporations may do with the increased cash flow (i.e., increase employee compensation, increase capital spending or increase share repurchases), the simple fact is that higher free cash flow increases corporate valuation.

In the short run, corporate tax reform is only one of many policy issues that impact financial markets. It seems indeterminate in the short run to ascertain whether financial markets are impacted more by domestic tax reform, global trade negotiations, or other policy issues.

Is the current stock market prone for a correction or is there still room for growth?

Stock market corrections of 10% declines are fairly normal, even when the stock market is in a secular bull market. For example during the incredible secular bull market of 1982 - 2001, there were 4 times when the S&P 500 declined by 10% or more.

"Bear market" corrections of 20% or more are usually associated with an economic recession. With almost no economic forecasters calling for a recession in the next year, it seems a correction of 20% or more is unlikely during the next 12 months.

There is room for growth in stock prices, but the extent depends on the key drivers for stock prices - earnings and interest rates. The analyst consensus is that earnings will continue to grow, albeit at a somewhat slower rate. If price multiples stabilize, the earnings growth would increase market prices. However, interest rates are also increasing, and as interest rates increase, price multiples fall. Consequently, growth in stock prices will occur if earnings grow faster than interest rate increases reduce price multiples.

What tips do you have for an individual investor? What sectors are expected to grow the most in the coming years?

Warren Buffett has recently had much advice for individual investors, and I would simply echo his advice. Rather than trying to guess the next sector or stock with great growth, I would advise individual investors to work on their financial plans and implement the investment component of their financial plans with index funds. For enterprising individual investors, I would recommend that they consult a financial advisor about the merits of factor investing.

Methodology

This report is based on information from the latest public disclosures (Form 13F-HR for Q1 2018 and SC amendments from April 1 to May 15) for over 400 of the largest U.S. hedge funds. Data refer only to equities (i.e. not American Depository Receipts, Global Depository Receipts, Notes, Bonds or any other type of tradable securities).

To construct the “Most Popular Stocks” list, we looked at each of the over 400 funds’ positions, added up the positions for the same stock and rank-ordered the stocks by their total holdings value.

To calculate the “Sector Breakdown” of the positions held by the tracked hedge funds, we added up all the positions of the hedge funds from the same sector and then divided by the total amount of the hedge funds’ positions.

For the “Most bought/sold stocks”, we added up all the sold transactions and all the buy transactions for a given stock in the last quarter and rank-ordered based on total activity.

Report Disclaimer: The information on this web page is provided as general and impersonalized investment information and is not a recommendation or solicitation to buy or sell any security. Please obtain additional appropriate professional advice as needed in making any investment decisions. Past performance does not guarantee future results.

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